Sh Gian Gupta, New Delhi V. ACIT, New Delhi

CO 205/DEL/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5495 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 29-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: B L GUPTA ITP
• Keywords: Unexplained investment; Capital asset; Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESI DENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA NO.2755/DEL/2010 ASSESSMENT YEAR : 2006-07 ACIT, CC-5, NEW DELHI. VS. SHRI GIAN GUPTA, C/O FORD SERVICE CENTRE, NH-8, RANGPURI, NEW DELHI. PAN : AAAPG7797G C.O. NO.205/DEL/2010 (ITA NO.2755/DEL/2010) ASSESSMENT YEAR : 2006-07 SHRI GIAN GUPTA, C/O FORD SERVICE CENTRE, NH-8, RANGPURI, NEW DELHI. PAN : AAAPG7797G ACIT, CC-5, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.L. GUPTA, ITP REVENUE BY : SHRI A.K. MONGA, SR. DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF THE CIT (A) DATED 30 TH MARCH, 2010 PASSED FOR ASSESSMENT YEAR 2006-07. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, THE ASSESSEE HAS FILED CROSS OBJECTIONS BEARING NO.205/DEL/2010. 2. THE ASSESSEE IS AN INDIVIDUAL. HE HAS FILED HIS RETURN OF INCOME ON 31.10.2006 DECLARING NIL INCOME. A SURVEY U/S 133 A OF THE ACT WAS ITA NO.2755/DEL/2010 C.O. NO.205/DEL/2010 2 CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE. HE WA S RUNNING A HOTEL WESTEND INN IN THE PROPRIETORSHIP CONCERN AP ART FROM OTHER VENTURES. SIMILARLY, HE HAS A BUSINESS INCOME FROM FORD SERVICE CENTRE. DURING THE COURSE OF SURVEY, INCRIMINATING D OCUMENTS WERE FOUND AND SEIZED. HIS STATEMENT WAS ALSO RECORDED. LD. ASSESSING OFFICER FRAMED THE ASSESSMENT U/S 143 (3) ON 31.12.2008. HE DETERMINED THE TOTAL TAXABLE INCOME OF THE ASSESSEE AT ` 47,73,790/-. THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE CHALLE NGED BEFORE THE CIT (A) AND LEARNED FIRST APPELLATE AUTHORITY NO TICED THOSE ADDITIONS IN PARA 3 OF THE IMPUGNED ORDER WHICH READ AS UNDER:- SL. NO. PARTICULARS AMOUNT (RS.) A) ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN LAND AT VILLAGE SAMALKHA FOR THE REASONS GIVEN IN PARA 1 OF PAGE 4 OF THE ASSESSMENT ORDER 1 CRORES. B) ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN LAND AT UDYOG VIHAR FOR THE REASONS GIVEN IN PARA 3 OF PAGE 4 OF THE ASSESSMENT ORDER. 57 LAKHS C) ADDITION ON ACCOUNT OF PERSONAL USE OF CAR, TELEPHONE AND DEPRECIATION. (I) 40,758/- (II)20,000/- (III)45,004/- D) THE ASSESSEE IS A PROPRIETOR OF WESTEND INN HOTEL, THERE ARE SEPARATE BOOKS OF ACCOUNTS FOR THIS HOTEL. AN ADDITION ON ACCOUNT OF CAR, TELEPHONE SALES PROMOTION AND DEPRECIATION HAS BEEN MADE FOR PERSONAL USE. (I)96,202/- (II)62,785/- (III)25,000/- (IV)49,934/- 3. LD. CIT (A) HAS DELETED THE ADDITIONS AT SL. NO. A ) AND B) OF THE ABOVE TABLE I.E., ADDITIONS OF ` 1 CRORE AND ` 57 LA C HAS BEEN DELETED. THIS DELETION IS BEING IMPUGNED BY THE REVENUE IN ITS APPEAL. LD. CIT (A) CONFIRMED THE DISALLOWANCE AT SL. NO. C) AND D) OF THE ABOVE TABLE AND THE ASSESSEE IS CHALLENGING THE CONFIRMATION OF THESE DISALLOWANCES IN HIS CROSS OBJECTIONS. ITA NO.2755/DEL/2010 C.O. NO.205/DEL/2010 3 4. WE HAVE HEARD LEARNED REPRESENTATIVES FOR THE PART IES AND WITH THEIR ASSISTANCE GONE THROUGH THE RECORD CAREFULLY. T HE ASSESSING OFFICER, WHILE MAKING ADDITION OF ` 1 CRORE HAS OBSER VED THAT DURING THE COURSE OF SURVEY, A COPY OF MEMORANDUM OF UNDERSTANDIN G (MOU) BETWEEN MRS. JIND SINGH, RESIDENT OF C-34, SUJAN SING H PARK, NEW DELHI AND THE ASSESSEE IN RESPECT OF A LAND MEASURING 13 BIGHAS 5 BOSWAS SITUATED AT VILLAGE SAMALKHA WAS FOUND. AS PER THIS MO U, A SUM OF ` 1 CRORE WAS PAID IN CASH WHEREAS A SUM OF ` 1 CRORE WAS PA ID THROUGH ACCOUNT PAYEE CHEQUE. THE ASSESSING OFFICER HAS MADE AD DITION OF ` 1 CRORE ON THE GROUND THAT THE ASSESSEE HAS NOT SHOWN THE P URCHASE OF THIS LAND IN HIS AFFAIRS AND ALSO FAILED TO SHOW THE SOUR CE OF ` 1 CRORE. THE LEARNED CIT (A) DELETED THE ADDITION ON THE GRO UND THAT THE ASSESSEE HAS ADMITTED TO HAVE MADE PAYMENT OF ` 1 CRORE THROUGH ACCOUNT PAYEE CHEQUE, BUT THE DEAL WAS NOT MATERIALI ZED AND, THEREFORE, THE CHEQUE WAS CANCELLED. THIS WAS DISCLOSE D TO THE ASSESSING OFFICER ALSO IN HIS STATEMENT. A REFERENCE TO T HE QUESTION NO.10 AND ITS REPLY IS WORTH MAKING HERE:- Q-10 WAS THERE ANY AGREEMENT FOR PURCHASE OF THE LAND AT VILLAGE SAMHAKHA WITH MRS. JIND SINGH AND IF YES WHE THER YOU HAVE GIVEN ANY AMOUNT BY WAY OF CHEQUE AND ALSO BY W AY OF CASH? ANS. YES, I HAVE PAID ORIGINALLY A CHEQUE OF RS.1 C RORE FOR THE PURPOSE VIDE CHEQUE NO.191004 DATED 23.12.2005 DRAW N ON IDBI BANK. BUT SINCE THE TRANSACTION DID NOT MATERIALIZE THIS CHEQUE WAS CANCELLED. I AM FILING THE COPY OF ACCOUN T IN THIS CONNECTION FROM MY LEDGER SHOWING BOTH THE ENTRIES. I HAVE NOT PAID ANY AMOUNT IN CASH. 5. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER ASSESSING OFFICER HAS GIVEN UNNEC ESSARY WEIGHTAGE TO THE COPY OF MOU. THE FACTUM OF TRANSFE R OF A CAPITAL ASSET BY MRS JIND SINGH IN FAVOUR OF THE ASSESSEE WAS NOT E STABLISHED. THE CASE OF THE ASSESSEE IS THAT HE HAS NOT PURCHASED ANY L AND. THE ALLEGED MOU IS A DOCUMENT EXHIBITING THE NEGOTIATION OF THE PURCHASE ITA NO.2755/DEL/2010 C.O. NO.205/DEL/2010 4 OF LAND, BUT IT NEVER MATERIALIZED. THE ASSESSING OFFIC ER HAS ERRONEOUSLY OBSERVED THAT IT IS FOR THE ASSESSEE TO ESTABLI SH THAT LAND WAS NOT PURCHASED. IN OUR OPINION, FOR CHARGING THE ASSESSEE WITH TAX ON ACCOUNT OF UNEXPLAINED INVESTMENT, IT IS THE ASSESSING OFFICER WHO OUGHT TO HAVE ESTABLISHED THAT LAND WAS PURCHASED BY TH E ASSESSEE AND HE FAILED TO DISCLOSE THE SOURCE OF SUCH PURCHASE. INSTEAD OF DISCHARGING THIS ONUS, LEARNED ASSESSING OFFICER TREATED A DOCUMENT AS GOSPEL TRUTH AND TRIED TO PUT AN ONUS UPON THE ASSESSEE T O PROVE A NEGATIVE FACT WHICH IS NOT PERMISSIBLE IN LAW. LEARNE D FIRST APPELLATE AUTHORITY HAS RIGHTLY CONSIDERED THIS ASPECT AND DELETE D THE ADDITION. 6. THE NEXT ISSUE IN THE REVENUES APPEAL RELATES TO DE LETION OF ` 57 LAC. THE ASSESSING OFFICER HAS AGAIN RELIED UPON PHOTO COPY OF AN AGREEMENT WHERE THE DETAILS OF PURCHASE WERE NOT FILL ED. HE HARBOURED A BELIEF THAT THE ASSESSEE HAD ENTERED INTO A N AGREEMENT TO PURCHASE A PLOT OF LAND MEASURING 18812.40 SQ. METRES T HROUGH MAJOR HARINDER PAL SINGH, WHO IS A DIRECTOR OF M/S AESTHETIC EXPORTS PVT. LTD. THE DEAL WAS FOR A CONSIDERATION OF ` 28 CRORE. A SUM OF ` 1.5 CRORE WAS ALLEGED TO HAVE BEEN PAID TO MAJ. HARINDER PAL S INGH AS ADVANCE MONEY. ACCORDING TO THE ASSESSING OFFICER ` 57 LAC WAS PAID BY THE ASSESSEE AND THE REST BY OTHERS. THE CASE OF THE ASSESSEE IS T HAT NO DEAL WAS MATERIALIZED AND NO LAND WAS PURCHASED. HE H AS NOT PAID A SINGLE PAISA. THE ASSESSING OFFICER WHILE REJECTING THE CONTENTION OF THE ASSESSEE HAS OBSERVED HAT HE HAS NOT PRODUCED THE OTHE R CO- PURCHASER AS WELL AS MAJ HARINDER PAL SINGH IN ORDER T O PROVE THAT THE LAND WAS NOT PURCHASED. LD. CIT (A) HAS DELETED THE A DDITION ON THE GROUND THAT DEAL WAS NOT MATERIALIZED AND THE ASSESSING OFFICER FAILED TO PROVE THE FACTUM OF TRANSFER OF A CAPITAL ASSET IN FAVOUR OF THE ASSESSEE BY MAJ. HARINDER PAL SINGH. ON DUE CONSIDERATI ON OF THE FINDINGS OF CIT (A), WE DO NOT FIND ANY ERROR IN IT BECAUSE, IT IS THE ASSESSING OFFICER WHO HAS TO PROVE THAT THE LAND WAS PURC HASED BY THE ITA NO.2755/DEL/2010 C.O. NO.205/DEL/2010 5 ASSESSEE. HAD HE FOUND THAT FACTUM, THEN, HE COULD HAV E INQUIRED ABOUT THE SOURCE FOR THE PURCHASE OF LAND. THE TOTAL CONSIDERATION, ACCORDING TO THAT DOCUMENT, OUGHT TO BE ` 28 CRORE. WHY THE ASSESSING OFFICER HAS CONFINED IT TO ` 57 LAC ONLY. IT SUGGEST THE CASUAL APPROACH ADOPTED BY THE ASSESSING OFFICER IN DEALING WI TH THE ISSUE. THE LAND HAS NOT BEEN PURCHASED, IN SPITE OF THAT HE I S MAKING AN ADDITION OF ` 57 LAC ON THE GROUND THAT THE ASSESSEE M UST HAVE PAID THE AMOUNT. IN OUR OPINION, SUCH AN ACTION IS BASED O NLY ON SURMISES AND FLIMSY CONSIDERATIONS. WE DO NOT FIND ANY ERROR I N THE ORDER OF THE CIT (A). THIS GROUND OF APPEAL IS REJECTED. 7. AS FAR AS THE DISALLOWANCES IMPUGNED BY THE ASSESSEE IN THE CROSS OBJECTIONS ARE CONCERNED, THERE IS NO DISCUSSION MAD E BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. WHILE COMPUTIN G THE INCOME HE MADE A REFERENCE ABOUT THE TOTAL EXPENSES I NCURRED BY THE ASSESSEE IN ITS PROPRIETORSHIP CONCERN I.E., FORD SERVICE CENTRE AS WELL AS WESTEND INN. THE ASSESSING OFFICER DISALLOWED 1/5 OF THE EXPENSES INCURRED ON CAR, TELEPHONE AND DEPRECIATION OF CAR IN THE FORD SERVICE CENTRE ON THE GROUND THAT POSSIBILITY OF PERSONAL USER OF THESE FACILITIES CANNOT BE RULED OUT. SIMILARLY, THE ASSESSING OFFICER HAS DISALLOWED THE EXPENSES AT 1/10 OUT OF TELEPHONE, SALES PROMOTION EXPE NSES, CAR EXPENSES WHILE COMPUTING THE INCOME FROM WESTEND INN. HE DISALLOWED THESE EXPENSES ON THE GROUND THAT POSSIBILITY OF PERSONAL USER OF THESE FACILITIES CANNOT BE RULED OUT. 8. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT SIMILAR DISALLOWANCES WERE MADE IN EARLIER YEAR, BUT LEARNED CIT (A) HAS DELETED THE DISALLOWANCES. WE HAVE CONFRONTE D THE LEARNED COUNSEL TO SHOW US THE LOG BOOK INDICATING THE EXCLUSIV E USER OF THE CAR FOR THE PURPOSE OF BUSINESS. WE HAVE ALSO CONFRONTED TH E LEARNED COUNSEL TO SHOW WHETHER HE HAS BEEN MAINTAINING ANY C ALL REGISTER FOR THE TELEPHONE AT THE BUSINESS PREMISES. HE WAS UNABLE TO EXPLAIN THE ITA NO.2755/DEL/2010 C.O. NO.205/DEL/2010 6 POSITION OF THE ASSESSEE. IN THE ABSENCE OF THESE REQUISIT E DETAILS, THE POSSIBILITY OF PERSONAL USER OF THESE FACILITIES CANNOT B E RULED OUT. HOWEVER, WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWE D 1/5 OF CAR EXPENSES WHILE COMPUTING THE INCOME OF FORD SERVICE C ENTRE AND 1/10 WHILE COMPUTING THE INCOME OF WESTEND INN HOTEL. TH US, ON ACCOUNT OF PERSONAL USER, THE TOTAL DISALLOWANCE HAS BEEN MADE AT 1/7.5 OF THE TOTAL EXPENSES. CONSIDERING THIS DOUBLE DISALLOWANCES, W E DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE OUT OF CAR EXPENSES, CAR MAINTENANCE AND DEPRECIATION TO THE EXTENT OF 1/10 IN THE CASE OF WESTEND INN ONLY. WE DELETE THE DISALLOWANCE OF EXPE NSES IN RESPECT OF CAR ONLY IN THE CASE OF FORD SERVICE CENTRE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.12.20 10. SD/- SD/- [G.E. VEERABHADRAPPA] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER DATED, 16.12.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES